The Worlds Leading Seller of Hugs
July 28, 2015 10:30 AM   Subscribe

Herbalife is an MLM company that its detractors believe is nothing more than a pyramid scheme. But, John Hempton manager of Bronte Capital disagrees. In a long post he sets out why "it is the stock in the portfolio I am most proud to own. It is also the stock about whose long-term prospects I am most bullish."

20,000 words of economic analysis sounds a dry read. But think again, exploring the economics of this one peculiar company is a rabbit hole of fascinating portraits on globalisation, psychology and everyday life around the world.
posted by Another Fine Product From The Nonsense Factory (54 comments total) 17 users marked this as a favorite
 
A stock market speculator stroking the thighs of an MLM scheme in which he has a substantial position. Long pump, quick dump.
posted by CynicalKnight at 10:40 AM on July 28, 2015 [31 favorites]


No I will not accept the friend request of your Herbalife alter ego, old friend from high school.
posted by charred husk at 10:42 AM on July 28, 2015 [10 favorites]


"Herbalife is a thinly veiled, only just on the edge of legal pyramid scheme" and "Herbalife is profitable and thus an excellent investment" are by no means contradictory.
posted by Holy Zarquon's Singing Fish at 10:44 AM on July 28, 2015 [44 favorites]


The irony being that if Herbalife distributors stopped buying Herbalife products and started buying Herbalife stock, they might actually make some money off of Herbalife.

Unless they all did that and the pyramid collapsed.
posted by murphy slaw at 10:47 AM on July 28, 2015 [5 favorites]


To be a Ponzi Scheme legally it has to be zero-sum. Herbalife (and Amway) are not zero-sum; products are produced and sold, and it is theoretically possible for every participant to make a profit.

If they were Ponzi Schemes they could be shut down by the government. But what they are actually doing is definitely legal. Shady, but legal.
posted by Chocolate Pickle at 10:48 AM on July 28, 2015


If you're going to read a long article on Herbalife (that's also entertaining), check out Rob Cockerham's Why Herbalife Doesn't Work.

(But no, I don't think I'm going to read an investor's post the approximate length of Animal Farm)
posted by gwint at 10:50 AM on July 28, 2015 [9 favorites]


theoretically possible for every participant to make a profit

It just cracks me up that people think that press-the-flesh direct sales, which is one of the hardest jobs in the entire world, is somehow a get-rich-quick scheme.
posted by murphy slaw at 10:51 AM on July 28, 2015 [34 favorites]


Multi-Level Marketing (MLM) is, by definition, a pyramid scheme, as it requires you (the salesperson) to recruit more and more salespeople to maintain a reasonable profit.

After a few generations, virtually the entire population of the Earth would have to be involved in the operation for anyone to make any money.

The fact that MLM businesses aren't explicitly illegal should be a scandal.
posted by Avenger at 10:53 AM on July 28, 2015 [27 favorites]


Psst. Hey, buddy. Wanna buy a pyramid?
posted by sexyrobot at 11:04 AM on July 28, 2015 [9 favorites]


I frequently see minivans covered in Herbalife static stickers parked in front of the check cashing / payday advance places. It makes me sick, like it's leeches all the way down.
posted by peeedro at 11:11 AM on July 28, 2015 [7 favorites]


Herbalife (and Amway) are not zero-sum; products are produced and sold, and it is theoretically possible for every participant to make a profit.

This is not true if the products are not actually being purchased and consumed by end users as fast as they are instead piling up as increasing inventory in the homes of an expanding sales force. Eventually the number of sellers falls off and the ponzi scheme collapses.

Since Herbalife does not allow you to see the numbers showing actual direct sales, there is no easy way to distinguish actual sales vs inventory growth since every new salesperson recruited and stocked with inventory looks like an end customer.
posted by JackFlash at 11:32 AM on July 28, 2015 [9 favorites]


As described in the excellent Merchants of Deception, Amway had a mind-bogglingly brilliant tactic called "The Retirement Party" for those who worked their way up the pyramid to quit their jobs and devote to Amway full-time.

Rather than hand in their resignation and get sideways glances about this bad decision, they instead announce their "retirement" that their fabulous Amway lifestyle is affording them. Throw in some balloons, party cake, and a triumphant limo ride into the sunset and the effect is complete.

This bit of theater transforms a questionable career move into a potent recruiting tool for the bystanders.
posted by dr_dank at 11:42 AM on July 28, 2015 [6 favorites]


Not to mention the fact that the products themselves don't work. I mean snake oil at least is merely a ripoff...
posted by Potomac Avenue at 11:43 AM on July 28, 2015 [1 favorite]


Imagine if Alex and Ani promised that all their crappy jewelery also made you able to fly?
posted by Potomac Avenue at 11:46 AM on July 28, 2015 [1 favorite]


I mean snake oil at least is merely a ripoff...

Right?
posted by Ogre Lawless at 11:50 AM on July 28, 2015


I wrote up a whole thing about my one-day experience with a MLM scam, but it ran to like 550 words, so I'll maybe just summarize it by saying that it was a deeply depressing experience.

I felt bad for the sales rep I was shadowing, working for less than peanuts - when we stopped for lunch, she ate a fucking Pop Tart out of her purse while even jobless me could afford a cheap slice of pizza. I felt bad for the small businesspeople that wound up sitting through unsolicited, high-pressure sales pitches for stationery and office supplies and I felt stupid for having spent a precious day of job-hunting on a total rip-off.
posted by ColdOfTheIsleOfMan at 11:51 AM on July 28, 2015 [12 favorites]


I wrote up a whole thing about my one-day experience with a MLM scam, but it ran to like 550 words, so I'll maybe just summarize it by saying that it was a deeply depressing experience.

we want to read the whole 550 word thing
posted by jayder at 12:06 PM on July 28, 2015 [33 favorites]


Come on man, buy a herb a life.
posted by octobersurprise at 12:12 PM on July 28, 2015 [1 favorite]


Well, OK, since jayder asked:

Years ago, I was living in a new city, running out of money and desperate for work. So I answered an ad for one of these things from Craigslist. They expressed interest, so I took a lengthy trip across town to their HQ, in a nondescript office park.

"How would you describe yourself?" was the first question put by an assertive young woman in a pantsuit.

"In what sense?" I asked, since that's a stupid question, but I wanted to give a good answer anyway.

"We just want to see how people react," she said. I guess it's nice that she was up-front about the fact that she was fucking with me. But it turned into a more normal, low-level job interview from there ("yep, golly gosh, I'm a super hard worker!") and culminated in an offer for me to spend a day shadowing a current sales rep on her rounds. I was desperate enough for money that I said OK, since they seemed genuinely interested.

So I go all the way back to their office the next day, very early, and sit in on the meeting they apparently have every morning. The crowd was young, earnest, and pretty diverse. I don't remember much about it except that it did end with everyone huddling up and putting their hands in for one of those "go team!" things. Then I went out with a young woman named Liz in her beat-up Oldsmobile to see how the job really worked.

Here's how it worked - Liz would march into local businesses and try to sell stationery and office supplies to whoever was within earshot, be they peon or manager, be there ne'er so many "NO SOLICITING" signs in the windows. With the exception of the very first place we visited - a nice woman whom Liz had clearly met before placed an order; I suspect she was a plant - we got bemused looks and uncomfortable, what-the-fuck-are-you-doing-here shuffling of feet at each and every stop.

Liz's leads were scattered widely across the area, so we did a lot of driving, listening to one short mix CD over and over and over again. I will never hear the song "Return of the Mack" without thinking of that day. I almost want to say that it was literally the only song on there, and we just listened to that track like 100 times over, but that surely can't be possible. Nevertheless, it's the only one I can recall, and I recall it in some detail.

Eventually we stopped for lunch. "This pizza place look OK to you?" Liz asked. Sure, I supposed, seemed just fine to me. I ordered two slices and a coke. Liz ordered nothing, preferring to eat a Pop Tart that she'd had in her purse. In retrospect, I feel like I should've given her one of the slices.

I'd intended to take copious notes about the nuts and bolts of the job, but I eventually resorted to writing "Holy shit does this guy hate us and want us to leave" or "jesus christ make it stop," as a substitute for staring awkwardly at the walls. We were at it for about 10 hours.

As I said above, the whole thing was just depressing. I felt awful for the low-level people working so hard for nothing, guilty for subjecting unsuspecting business owners to unsolicited and obnoxious sales pitches, and frustrated that I'd wasted a whole day on this crap.
posted by ColdOfTheIsleOfMan at 12:25 PM on July 28, 2015 [71 favorites]


Did a quick search through that piece for "FDA" and "CFSAN" and "Redbook" and a few other important keywords that, if not brought up in a piece about this sort of thing, should be more of a dog whistle than a call to subtle consideration. FDA CFSAN is just now in the first stages of completely revising its principal regulatory guidance document (Redbook), and that revision is pretty explicitly intended to help FDA catch up with the wild west aspects of the "nutriceutical" insdustries--the industries that think the DSHEA granted them carte blanche to sell you anything they want, make any claims about the potential health benefits of it, and get out of regulatory oversight scot-free. At the first meeting about this last year, 99% of the public commenters were lobbyists from companies like Herbalife more or less threatening (emptily?) to cause problems for the Agency. It's telling that the only mention this piece makes about regulation is in terms of financial regulation, not, you know, the kind that ensures companies aren't selling placebo or poison.

Why, yes, investing just sounds peachy. Best of luck.
posted by late afternoon dreaming hotel at 12:40 PM on July 28, 2015 [7 favorites]


Wow, this article is full of all the cant and drivel you'd expect. Example: he notes that a warning sign of MLMs is that people have huge stocks of inventory piling up. Does this happen with Herbalife, he asks? Well, he says he checked eBay and Craigslist, and there are a few big-volume sellers who have been doing it for years. He notes that this is actually in violation of Herbalife policy, as they don't want people selling via the internet. Then, he says that he doesn't see any "distressed" sellers apparently looking to sell a big stock quick to get it off their hands, and concludes that there must not be any inventory piling up. But if Herbalife bans selling on the internet, of course nobody is trying to unload their stock online! Isn't that obvious?

Not sure I have the stamina to read any more of this, though.
posted by koeselitz at 12:42 PM on July 28, 2015 [5 favorites]


You know, it's all very easy to make fun of snake oil when you're not the guy with the rusty snake.

To be a Ponzi Scheme legally it has to be zero-sum. Herbalife (and Amway) are not zero-sum; products are produced and sold, and it is theoretically possible for every participant to make a profit.

Is that "theoretically possible" in the same sense that, say, time travel is theoretically possible?
posted by Flexagon at 12:47 PM on July 28, 2015 [9 favorites]


That stationery selling story seems pretty atypical of MLM insofar as someone was hired out of a corporate office, not recruited into a rep's upline in their living room, and actually spent ten hours trying to sell the product to real end-users, not recruiting for one's own downline.
posted by MattD at 12:50 PM on July 28, 2015 [1 favorite]


... not all scammy / pathetic sales organizations are MLM, is what I'm saying.
posted by MattD at 12:50 PM on July 28, 2015 [1 favorite]


According to an ep (Season F/6, Ep 6, XL version) of QI, actual snake oil is actually pretty useful.
posted by Rev. Syung Myung Me at 12:52 PM on July 28, 2015 [1 favorite]


MattD -

Perhaps the terminology is wrong, I'm unsure - I believe the model is still the same, even if it didn't involve anybody's living room or garages full of dubious cosmetics. The idea, if I remember correctly, was that your boss takes a cut of your sales, and if you meet goals, they'll give you your own team, and so on.

It was certainly a pyramid scheme, though the amounts of money involved appeared to be so pitiful that it's kind of a wonder anybody at all was taken in, at that point. It may be that I caught a glimpse of this particular one just before it folded.
posted by ColdOfTheIsleOfMan at 1:16 PM on July 28, 2015


Agreed, ColdOfTheIsleOfMan, not an MLM in the strictest sense, but it definitely sounds like one of these "marketing teams" that regularly trawl Monster and job boards with "job openings" that involve shitty high-pressure sales of magazine subs, toner cartridges, etc. Having heard of a few of those stories, there are some pretty shady/scary characters up in these places.
posted by dr_dank at 1:24 PM on July 28, 2015


When I was a teenager, I had a babysitting gig, three or four nights a week, caring for the children of a couple that were Amway distributors. They always paid me appropriately and I almost never had to stay until the TV stations went off the air. They claimed to be successful at it and I didn't ask questions. They had a garage full of Amway products and all the cleaning products they used were Amway, and they bragged on how Amway stuff was the best. When I would squirt some of their dish soap in to clean up after feeding the kids, it didn't seem that great. Smelled different from the Palmolive at home, but so what?

Nowadays I wonder if they really were doing that well, or if they were hiding just how much money they were losing, month after month? They always seemed sort of religious about it; even at 15 I got this cult vibe from them. If my family hadn't moved away, I suppose I'd have either seen it all come crashing down, or they might have tried to recruit me when I grew up. I like to think I'd have been smart enough to say no, but let's face it our 18-year-old selves were as stupid as any other 18-year-olds. I suppose my parents would have done their best to keep me out of it and probably would have succeeded; whatever our disagreements they were alert on that suit.

At a minimum, it cost these folks a lot of evenings that they'd have otherwise spent with their preschoolers (who were nice kids), and the few bucks they paid a slightly older kid to watch them.
posted by elizilla at 1:28 PM on July 28, 2015 [3 favorites]


In the past year or two I've started seeing a lot of these MLM schemes come up on my facebook feed from old high school acquaintances. Usually it goes, get married -> get pregnant -> quit job -> stay at home a while -> get into MLM scheme. At this point Ive got the Mary Kay girl, the Le-vel Thrive girl, the Herbalife girl, and maybe worst of all, THREE "essential oils" girls. Anecdotally it's always women, but Im sure there's plenty of men out there doing the same thing.

And hell, my own grandma never "worked", but made a decent part-time income off selling Avon to the whole neighborhood, although at least Avon is an actual product line.
posted by T.D. Strange at 1:37 PM on July 28, 2015 [2 favorites]


Quick note: Ponzi schemes and pyramid schemes are different.
posted by Monochrome at 1:44 PM on July 28, 2015 [2 favorites]


My Facebook feed has been clogged with Beachbody'Shakeology bullshit recently, as some of my wife's friends have bought into it. From the little I have picked up about it, Beachbody seems to have a similar set up to Herbalife. For those that are more familiar, is that an accurate assessment?
posted by Falconetti at 2:09 PM on July 28, 2015


The script given to MLM reps to recruit younger guys and gals looking for jobs is really indirect, and deceiving. I got to sit through a pitch from a pair of men in their mid-late 20s to a close 19yo friend of mine. It was full of "building leadership" and "presenting a brand" type buzzwords that made it difficult to even call it a sales job based on what we were told.
posted by shenkerism at 2:12 PM on July 28, 2015


An ex of mine did this. It wasn't Herbalife or Amway, but it involved signing people up for household products. A "customer" would commit to a minimum monthly order of this stuff, ranging from cleaning products to toiletries to dietary supplements. Some people would just stop there and be customers and that's that. But you also could recruit your own customers and receive 5% of their order value (up to a max of 25%, or 5 customers, I think). But then the real multi-level marketing math comes in...If you can convince those 5 people to go out and sell to their own customers, you get 5% of those sales as well...and so on down 6 or 7 levels. So the financial break-even point is having 20 people below you in your "triangle" ("pyramid" is a dirty work among these people). Any more than that and you're making a profit.
When I knew her, my ex had considerably more than 20 people in her triangle, and was making a healthy supplementary income out of the deal (plus getting her own order of products, of course, which presumably has some value). Last I heard she had increased that to the point where it was her only job, and was making close to 6 figures.
The thing is...it wasn't a get rich quick scheme, and she knew that. She was recruiting and training and expanding her "triangle" all the time. It was a job and took up several hours a day of dedicated work, and it appears to have paid off.
But it doesn't take much math to figure out that eventually the local market for the products gets saturated and recruiting more customers gets harder and harder. My ex got in early and put in considerable effort and made money. Most don't.
posted by rocket88 at 2:19 PM on July 28, 2015 [3 favorites]


Quick note: Ponzi schemes and pyramid schemes are different.

There's also a difference between pyramid schemes with actual product, Amway, Avon, Mary Kay, etc and Herbalife pills or essential oils or , which is pure snake oil. At least with legit companies, you do get a usable product which nominally has value, even it's not the "best" ever like the marketing materials tout it as. Herbalife you might as well light your money on fire.
posted by T.D. Strange at 2:36 PM on July 28, 2015 [2 favorites]


My Facebook feed has been clogged with Beachbody'Shakeology bullshit recently, as some of my wife's friends have bought into it. From the little I have picked up about it, Beachbody seems to have a similar set up to Herbalife. For those that are more familiar, is that an accurate assessment?

Yep. OrigamiOwl, ThirtyOne, and such are not much different.
posted by MissySedai at 3:33 PM on July 28, 2015


I saw John Hempton speak at the last but one Camp Alphaville (Where the Financial Times’ FTAlphaville sub-site meets the real world: “Peace, Love & Higher Returns” was the motto.) The amount of effort that went into proving one of his hedge fund’s short theses wrong was truly impressive. I wouldn’t underestimate him.
posted by pharm at 4:17 PM on July 28, 2015


Bill Ackman, reasonably famous for pushing pharma companies to sell/merge/break up into pieces, has been short on Herbalife and aggressive about it for a long time, and has gotten much more press for his position than the FPP here (who seems to be an outlier). Vis, Forbes link, obvs, (with the silly delay ad), or Business Insider. He's losing money on paper, and deeply active in calling attention to the pyramid-y nature of the whole thing.
posted by Vcholerae at 4:32 PM on July 28, 2015 [2 favorites]


One of the saddest things I've seen recently was a incredibly morose looking child with his mother at a church rummage sale being forced to help upsell herbalife products. The mom was talking about how she took him to all her sales events and that they were a great team. We made eye contact for a second and could see the "please save me or put me out of my misery" look.
posted by Ferreous at 5:13 PM on July 28, 2015 [1 favorite]


I was a little intrigued by the article, which seemed to have the Herbalife customers all taking the supplement together and it being a great community moment. It seemed for a second there that there was a point to it. Then I realised that it might be a mild social positive in a society which is tightly enough coupled that people can sell to each other informally. In a society where trade and social life are kept separate, though? It makes people poor and loses them their friends.
posted by ambrosen at 5:19 PM on July 28, 2015


Hempton dislikes Ackman. That's how this all began.
posted by JPD at 5:34 PM on July 28, 2015 [1 favorite]


The other thing that MLM schemes require people to do is burn through friendships. Eventually that inventory exhausts itself. At the end of the line, unless you're that rare case at the top of the pyramid, you've beggared yourself twice.
posted by mandolin conspiracy at 5:53 PM on July 28, 2015 [9 favorites]


I can't read the whole 20,000 words, because I don't care that much, but if I am following this guy's argument, the legally mandated standard that 70% of product needs to be sold outside the network of distributors in order to avoid being shut down as an MLM scheme is unfair to Herbalife because so much of the product is consumed by "fat illiterate Hispanics" (his words) who form diet clubs and sell product to each other, all of whom are "in the network" because they all sign up as distributors to get the hefty discounts.

It is a somewhat interesting argument, but I find his piece astonishingly depressing for some reason.

This was the passage with his lovely musings on Hispanics:

The court/judgements wanted to work out the difference between forced and unforced internal consumption and came up with this 70 percent rule. If 70 percent of the product is sold external to the network it must be real. The Amway case also required buy-back of excess inventory (although it allowed it to be bought back with a discount-restocking fee) and it required there be a number of external customers who were identified.

Herbalife clubs in Queens do not obviously meet this criteria. They work by being alcoholics anonymous for fat Hispanic people. You go there and it is the social support network that gets you to stick to the diet. Almost everyone “signs up” as a distributor. Almost all sales are thus internal to the network.

However my casual observation suggests that many sales are real sales. People who are signed up as distributors (but with no intention of selling stuff) regularly come in and buy product from other distributors.

Some of the clubs I visited asked for my name when I bought shakes - and the club manager explained that he took it because there was a “ten customer rule” but compliance with this was the exception rather than the norm - and many of the club managers were probably illiterate - so compliance was impossible. [Running a Herbalife club, sometimes successfully, is a job taken by more than a few illiterate Hispanics.]

posted by jayder at 6:30 PM on July 28, 2015 [3 favorites]


MLMs are huge in Malaysia. Amway and many others make a huge chunk of their profits from Asia in general. One reason it works so well here is that people have massive social networks, irl and online, so there are plenty of friends, acquaintances, neighbors and relatives to pimp. The leading family in a village will join a new one and, bam, the whole village becomes the downstream.

When I first moved here, I was suckered into attending several elaborate MLM presentations before I got wise (self-link).
posted by BinGregory at 6:59 PM on July 28, 2015 [2 favorites]


Hempton writes like an asshole, but he's pretty damn good at sniffing out scams. His main "thing" is shorting sham companies and (supposedly) making good money at it. His economics are also relatively sound. Plus his politics aren't bad, for a hedge fund manager.

If you spend the time to read several years of his blog, you'll see he's been successful at it over and over again. More than one Chinese scam company has been brought down by him.

You'll note that he never says that Herbalife is a societal net good, only that they appear to be what they say they are, at least in accounting terms, and have thus far been a good investment.
posted by wierdo at 7:03 PM on July 28, 2015 [2 favorites]


...at least in accounting terms

This is important.

And herein lies the rub. If you're a consumer product company, you could have unsold inventory sitting on your books (and in your warehouses). For Herbalife, you unload all of that inventory, immediately, as sales to the "downstream" or "downline." Bam. As a company, you've turned that inventory into cash instantly, with no worries about where or how that product is sold or not down the line.

Ackman is willing to keep eating the paper losses to maintain his short position in the faith that, somewhere down the road, Herbalife will eventually stop being able to sell this stuff off to that downline of people.

In a non-MLM consumer products company, it needs to make sure that their product is hitting store shelves and getting sold and that invoices are collected (returned inventory, retailers saying 'meh, not selling, not taking any more,' retailers unable to pay invoices, etc). This is not the problem Herbalife has. It's just producing it and convincing people they should buy it because they immediately offload the accounting consequences of this product remaining unsold to the immediate buyers (anyone anywhere on the pyramid) and take a slight hit to their overall margin by rewarding people higher up on that pyramid with a commission on getting other buyers of the products on board.

But the margin is still there. Unsold product is off the books. It's now the buyer's problem, because they now own it.
posted by mandolin conspiracy at 7:24 PM on July 28, 2015 [7 favorites]


And by "buyer" I mean "certified distributor."

Illegal? No. Can you turn that into cash yourself without your friends and acquaintances disliking you because you've turned otherwise good faith interactions "Hey, how are you?" "Want to go for coffee?" into sales opportunities because you're personally holding this inventory and need to unload it in order to convert it into cash - with your own margin built in so you can make money?

Well, then that becomes your problem.

Not a good problem to have.
posted by mandolin conspiracy at 7:28 PM on July 28, 2015 [4 favorites]


And by "buyer" I mean "certified distributor."

That's one of the biggest lies of MLM - that you "own your own business." Taking Mary Kay Cosmetics as an example: The agreements are extremely restrictive. The personal website program comes with even more restrictions. There's even a dress code.

(Pink Truth, the site I've linked to, is a great resource. As the name suggests, it focuses on Mary Kay, but they do have a lot of information about MLM in general and other MLM companies.)
posted by SisterHavana at 9:06 PM on July 28, 2015 [6 favorites]


The interesting thing to me here was this:

Lead selling scams

One new thing in Ackman’s Herbalife presentation (and where the taint against Herbalife is hard to make go away) is the prevalence of lead sellers in the network. Here Mr Ackman is on stronger ground.

The most offensive of these was a guy by the name of Shawn Dahl who had a business called “Income at home”. As the inventory loading thesis (which was the original core short-thesis) disappeared the stories about Shawn Dahl grew louder.

There is a reasonable press story here (probably sourced from people associated with Bill Ackman):
http://www.theverge.com/2013/3/27/4099100/income-at-home-herbalife-scamworld-biz-opp
Dahl probably sent over 2 billion scam emails in the 2010-2012 - you were told about a woman who earned 7-10 thousand per month working from home. At my hedge fund we have a few email accounts we collect scam emails in (for the reason of finding stocks to short). We saw hundreds of “work from home” emails.

The emails and the first click did not identify Herbalife - but I gather that is where they led you. To get into the business opportunity you needed to buy leads, websites and other services from Dahl. The amounts of money fleeced by people who purchased these services were large and it was not difficult to find people who had been hurt by the lead sellers.

There were numerous stories in the press about the damage caused by lead sellers and there were three big lead sellers in the organization. The three big alleged lead sellers were Shawn Dahl, John Peterson and Doran Andry.

Two of those (Dahl, Peterson) were highly active. Doran Andry was a lead seller back in Mark Hughes day - and was and remains a very senior distributor (Chairmans Club) until this day. However he was successfully sued for fraud by some hurt distributors a decade ago and settled. To my knowledge he has not sold leads since. [All Ackman examples involving Doran Andry are over a decade old.]

Herbalife implemented a rule change in March 2013 (about three months after the Ackman presentation) such that anyone who sold leads was disqualified as a Herbalife distributor and lost their downline. Dahl and Peterson severed links with the company. Doran Andry remains silent (but still presumably collects checks from his downline). Dahl went to Nutrie another MLM (not very successfully it seems) and you can find his twitter feed here:

https://twitter.com/shawndahl

John Peterson shot himself in the roof of the mouth (to a surprising amount of press coverage).

When the company banned lead sellers it said that it would have a low single-digit negative effect on sales. You can’t see it in the sales numbers during the following three quarters.


Lead selling, the shady flyers tacked to telephone poles, the spam emails, the Craigslist postings, and so on is actually the most negative aspect of Herbalife that I have been familiar with - otherwise it doesn't seem any different to me than thirty-one, Mary Kay, Avon, and so on.

If they have stopped that sort of thing, then I still don't morally support it, but it's honestly improved and I think it'll survive any government intervention (based on the little I know, obviously I'm no expert.)

This was very interesting, MLMs fascinate me for some reason.
posted by imabanana at 10:41 PM on July 28, 2015 [1 favorite]


There is a reason that MLM is known as Mormons Losing Money.

You can hardly talk to anybody in Utah without them trying to sell you something. And they are all trying to sell to each other. The whole state economy is practically one big pyramid scheme.
posted by JackFlash at 12:42 AM on July 29, 2015 [5 favorites]


He's losing money on paper, and deeply active in calling attention to the pyramid-y nature of the whole thing.

These two things are not unrelated.
posted by chavenet at 2:26 AM on July 29, 2015 [2 favorites]


When people talk about meritocracy, I think of MLM success stories.
posted by oceanjesse at 5:04 AM on July 29, 2015 [2 favorites]


MLM is the nightmare Thomas Hobbes has after eating too many sausages and drinking mead with Adam Smith all night in the tavern.
posted by Potomac Avenue at 6:43 AM on July 29, 2015 [3 favorites]


"How would you describe yourself?"

I'm on my back, my belly baking in the hot sun, beating my legs trying to turn myself over but I can't, not without your help, but you're not helping.

You're not helping. Why is that, Leon?
posted by flabdablet at 10:01 AM on July 29, 2015 [5 favorites]


ColdOfTheIsleOfMan: "So I go all the way back to their office the next day, very early, and sit in on the meeting they apparently have every morning. The crowd was young, earnest, and pretty diverse. I don't remember much about it except that it did end with everyone huddling up and putting their hands in for one of those "go team!" things. Then I went out with a young woman named Liz in her beat-up Oldsmobile to see how the job really worked."

Holy shit. I had more or less this precise experience in Central Pennsylvania around 1995 or so, only in my case it was a weedy-looking dude in a Ford Escort, and we went to Brothers on Route 15 for lunch. Office supplies and magazines, cold-calling, the whole nine yards.

Reading your description brought back that day so strongly that I'm actually mildly nauseated. Well done.
posted by scrump at 12:48 PM on August 3, 2015


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